<<<<<<< HEAD # Report Elements

Abstract

Our main question for this data set is “How does the consumer price index change relative to state wage?”. This question is particularly important because it tells us whether or not employees are making enough money to purchase goods and necessities. To address this question, we will use R to extract data from the Minimum Wage dataset that we obtained from the Kaggle website, and write our reports in Atom using Markdown.

Keywords: State minimum wage, federal minimum wage, consumer price index, living wage

Introduction

This project focuses on assessing whether the current state wage in Washington state is high enough for workers to purchase goods. The dataset used in this project is titled U.S. Minimum Wage by State from 1968 to 2020. In order to perform our analysis of this data, we will extract the consumer price index (CPI) and state wage from the data set. Comparing the changes of these two values over time will allow us to find out whether the state wage has increased enough to catch up with the changes in the consumer price index. If the ratio between the minimum wage and CPI is greater than 1, then the goods are relatively cheaper than before. If the ratio is equal to 1, then the minimum wage has increased at the same rate as the CPI. If it is lower than 1, it means that the goods are more expensive than before and minimum wage should be higher.

Design Situation

Human values

The main human values connected to our project are a concern for citizens’ wellbeing and quality of life, and an attempt to achieve social justice by drawing conclusions that may decrease economic inequality and bridge the poverty gap. As college students, we understand the financial pressure of struggling to make ends meet while working minimum wage jobs. However, raising the minimum wage has been a long-debated issue. According to a Pew Research Center survey conducted in April 2021, about 6 in 10 U.S. adults (62%) favored raising the federal minimum wage, while 4 in 10 (38%) opposed the proposal (Pew Research Center). “Proponents of raising the minimum wage argue that the current federal rate is too low and not commensurate with the rising cost of living…Opponents, however, worry that an increase will place an undue burden on business owners, prompting layoffs and greater unemployment” (National Conference of State Legislatures).

Direct and Indirect Stakeholders

The direct stakeholders of our topic of interest are working class Americans, who will be most affected by any changes to the minimum wage. This group primarily consists of people who hold jobs which “provide low pay, require limited skill, or physical labor” (Investopedia). This group’s primary motivation is to earn a living wage to cover necessities such as food, rent, and healthcare for themselves and their dependents. Indirect stakeholders include policymakers. Although they are not affected directly by minimum wage laws, they still hold the power to change the minimum wage.

Benefits and harms

Changes made to the minimum wage, particularly raising it, comes with benefits and consequences. The most obvious benefit would be lifting low-wage workers and their families out of poverty. According to the nonpartisan Congressional Budget Office (CBO), increasing the minimum wage to $15 could lift 900,000 people out of poverty. However, increasing the minimum wage means increasing the cost of hiring a worker – which may not be sustainable for smaller businesses. The CBO estimates that “raising the federal minimum wage to $15 an hour by 2025 would increase wages for at least 17 million people, but also put 1.4 million Americans out of work” (NPR). The CBO adds, “Young, less educated people would account for a disproportionate share of those reductions in employment” (NPR).

Research Questions

  1. How has Washington’s state minimum wage changed over time?
  2. How does the ratio of the federal minimum wage to consumer price index change over time?
  3. How does the ratio of Washington state minimum wage to consumer price index change over time? Minimum Wage/CPI ( > 1 : Things are cheaper | 1: Same | 1 > : Things are more expensive)
  4. How does the federal minimum wage rate of increase compare to the consumer price index rate of increase?

In order to find out whether the minimum wages increased, there are questions to be asked. First, it is important to find out how Washington’s state wage has changed over time. By doing so, we are able to compare it with the CPI. Besides state wage, we also have to question the change of Federal wage over time. As we did for state wage, we should also try to compare Federal wage with CPI. These two different comparisons will give us a complete understanding over the ratio of minimum wage and the consumer price index.

The Dataset

Observation Description
Year The year of the data
State The state or territory data
State.Minimum.Wage The state’s minimum wage starting on January 1
State.Minimum.Wage.2020.Dollars The state minimum wage converted to 2020 dollars
Federal.Minimum.Wage The federal minimum wage starting January 1
Federal.Minimum.Wage.2020.Dollars The federal minimum wage converted to 2020 dollars
Effective.Minimum.Wage The minimum wage that is enforced in the state on January 1. This value would equal the federal minimum wage if the state minimum wage is lower than the federal minimum wage
Effective.Minimum.Wage.2020.Dollars The effective minimum wage converted to 2020 dollars
CPI.Average The average value of the consumer price index. The consumer price index is a “measure of the average change over time in the prices paid by urban consumers for a market basket of goods and services” (U.S. Bureau of Labor Statistics).
Department.Of.Labor.Uncleaned.Data The unclean, scraped value from the United States Department of Labor’s website.
Department.Of.Labor.Cleaned.Low.Value The state’s lowest enforced minimum wage on January 1. Some states enforce different minimum wage laws depending on the size of the business, with smaller businesses typically having lower minimum wage requirements.
Department.Of.Cleaned.Low.Value.2020.Dollars The state’s lowest enforced minimum wage in 2020 dollars
Department.Of.Labor.Cleaned.High.Value The state’s highest enforced minimum wage of January 1
Department.Of.Labor.Cleaned.High.Value.2020.Dollars The state’s highest enforced minimum wage in 2020 dollars
Footnote The footnote provided on the United States Department of Labor’s website, if any

Expected Implications

Based on our research questions, we believe that policymakers would be most affected by our data set and analysis. Our project seeks to answer the question of how minimum wage affects an individual’s ability to afford basic goods and necessities. Comparing the federal and state wages may push policymakers to reevaluate what their minimum wages should be in order to make these goods accessible. Especially in states with minimum wages below the federal standard, this would be an important consideration for citizens who currently cannot afford these goods because of the low standard. Technologists and designers may also be affected by our data as professionals who create solutions for a wide range of audiences. Understanding how consumers are affected by low minimum wages may help these professionals find ways to create more accessible products and solutions for those in lower income areas.

Limitations

Although the data in this database shows us the correlation between the minimum wage increase and the average value of the Consumer Price Index in a year, there are limitations to the data which must be recognized. There is no data on the types of products the population purchases or information about the products’ cost overtime. Thus, we can’t compare how competitive the labor market is since we do not have the weight of each category in the basket. Also, there is no data about the job market which limits the use of the data for the purposes of analyzing employment trends. We also can’t use the data to determine the negative implications, such as the amount of jobs lost/gained or inflation due to the increase in minimum wage. Additionally, we are unable to identify the change in employment rates of one state relative to other states.

References

Changes in basic minimum wages in non-farm employment under state law: Selected years 1968 to 2021. (n.d.). Dol.Gov. Retrieved February 4, 2022, from https://www.dol.gov/agencies/whd/state/minimum-wage/history

CPI home. (2017, October 11). Bls.Gov. https://www.bls.gov/cpi/

Kenton, W. (2021, December 30). Working Class. Investopedia. https://www.investopedia.com/terms/w/working-class.asp

Lislejoem. (n.d.). US Minimum Wage by state from 1968 to 2020 [Data set].

Most Americans support a $15 federal minimum wage. (2021, April 22). Pew Research Center. https://www.pewresearch.org/fact-tank/2021/04/22/most-americans-support-a-15-federal-minimum-wage/

Saige Draeger, L. K. (n.d.). Increasing the minimum wage. Ncsl.Org. Retrieved February 4, 2022, from https://www.ncsl.org/research/labor-and-employment/increasing-the-minimum-wage.aspx

Selyukh, A. (2021, February 8). $15 minimum wage would reduce poverty but cost jobs, CBO says. NPR. https://www.npr.org/2021/02/08/965483266/-15-minimum-wage-would-reduce-poverty-but-cost-jobs-cbo-says

Summary Information

For the summary information, we wanted to compare minimum wage to the average consumer price index in 2020. We did this by finding the ratio of the minimum wage to the average CPI (minimum wage divided by average CPI) for five state minimum wages as well as the federal minimum wage. This information lets us identify which states have the most livable wages. For the five states, we chose to look at one from each of the five regions of the United States: Washington for West, Texas for Southwest, Michigan for Midwest, Alabama for Southeast, and New York for Northeast. We also wanted to choose states with different levels of minimum wage. We were able to represent a relatively large range of minimum wage, with the lowest value being $0 and the highest being $13.50. Washington, New York, and Michigan had the highest state minimum wage to average CPI ratios of 0.0521921, 0.0456197, 0.0373077, respectively. Our research indicates that states with higher liberal voting records are more likely to have higher minimum wages–and therefore, higher state minimum wage to average CPI ratios (Ford et al.). This matches up with our results as Washington, New York, and Michigan are all left-leaning states. Our research also shows that cost of living has a positive relationship to state minimum wage. It makes sense that Washington and New York have the highest state minimum wage to average CPI ratios, since their cost of living factors are the highest of all five states. Texas and Alabama have the lowest state minimum wage to average CPI ratios of 0.0280291 and 0, respectively. This matches up with the evidence since Texas and Alabama are right-leaning states with lower cost of living factors (since they are rural instead of urban states). The federal minimum wage to average CPI ratio is 0.0280291. It makes sense that the three states with a higher ratio than this are all liberal.

Chart 1: US Minimum Wages in 2020

The purpose of this chart is to see how the minimum wage differed across all 50 US states in the year 2020. Creating a choropleth map, allows us to easily visualize which states had the highest minimum wage (highlighted in dark purple) and which states had the lowest minimum wage (highlighted in white) in 2020. One notable insight is that Louisiana, Tennessee, Mississippi, Alabama, and South Carolina all had a state minimum wage of $0 in 2020. There appears to be a trend that southern states had the lowest minimum wages, while states on the west coast and upper east coast had the highest minimum wages. As mentioned in the ‘Summary Information’ section, the lower state minimum wages in southern states are influenced by southern states’ low proportion of liberal voting records and low cost of living.

fig

Chart 2: Comparing Washington State Minimum Wage to Average CPI Over Time

The purpose of this chart is to show how the minimum wage of Washington changes in relation to the average CPI between the years of 1968 and 2020. This chart is important because it shows how the prices of goods continue to increase while the minimum wage stays at a relatively low value. Since the CPI is reflective of the U.S. rise in inflation, we can use this chart to understand how this gap in minimum wage and CPI affects consumer spending. One notable observation is that the CPI is far higher than the minimum wage in Washington for all years. This shows that those receiving minimum wage may not be able to afford goods as the price inflates, thus demonstrating a need for higher wages.

plot(line_plot)

Chart 3: Comparing Change in Minimum Wage in 5 States

The purpose of this chart is to visualize changes in state-minimum wage in five different states from every region in the United States. This chart is important because it visualizes how minimum wages in different states have changed over time from 1968 to 2020. Changes vary state from state. With the information from chart, we are able to compare the changes in CPI in those states and verify whether the minimum wage in certain states or regions has increased enough to catch up with the change in CPI.

plot(scatter_plot)

Table: Computing Ratio of State Minimum Wage to Average CPI for Each State in 2020

Our table shows the ratio of the state minimum wage to average CPI in 2020. We computed this table to compare each state’s minimum wage to the average CPI. We arranged the table from highest value to lowest. This will let us identify which states have the most livable wages and allow their citizens to best afford a market basket of consumer goods. As the table reveals, the states with the highest state minimum wage to average CPI ratios are D.C., Washington state, and California. The states with the lowest state minimum wage to average CPI ratios are Louisiana, Tennessee, Mississippi, Alabama, and South Carolina–all having a value of 0. The pattern that we see here was pointed out in previous paragraphs. Liberal states with high costs of living, such as D.C., Washington, and California tend to have higher state minimum wages and, in turn, higher state minimum wage to average CPI ratios. Conversely, less liberal states with lower costs of living, like Louisiana, Tennessee, Mississippi, Alabama, and South Carolina tend to have lower state minimum wages and, in turn, lower state minimum wage to average CPI ratios.

kable(state_min_wage_to_CPI) %>%
  kable_styling("striped", full_width = FALSE)
State State.Minimum.Wage.To.CPI
District of Columbia 0.0541251
Washington 0.0521921
California 0.0502590
Massachusetts 0.0492925
Arizona 0.0463929
Colorado 0.0463929
Maine 0.0463929
New York 0.0456197
Oregon 0.0434934
Connecticut 0.0425269
Maryland 0.0425269
New Jersey 0.0425269
Vermont 0.0423722
Rhode Island 0.0405938
U.S. Virgin Islands 0.0405938
Alaska 0.0393953
Hawaii 0.0390474
Arkansas 0.0386608
Michigan 0.0373077
Missouri 0.0365344
South Dakota 0.0359545
Delaware 0.0357612
Illinois 0.0357612
Nebraska 0.0347947
New Mexico 0.0347947
West Virginia 0.0338282
Ohio 0.0336349
Montana 0.0334416
Florida 0.0330936
Guam 0.0318952
Minnesota 0.0315085
Idaho 0.0280291
Indiana 0.0280291
Iowa 0.0280291
Kansas 0.0280291
Kentucky 0.0280291
Nevada 0.0280291
New Hampshire 0.0280291
North Carolina 0.0280291
North Dakota 0.0280291
Pennsylvania 0.0280291
Texas 0.0280291
Utah 0.0280291
Virginia 0.0280291
Wisconsin 0.0280291
Georgia 0.0199103
Wyoming 0.0199103
Puerto Rico 0.0196397
Oklahoma 0.0077322
Alabama 0.0000000
Louisiana 0.0000000
Mississippi 0.0000000
South Carolina 0.0000000
Tennessee 0.0000000

References

Ford, W. F., Minor, T., & Owens, M. F. (2012). State minimum wage differences: Economic factors or political inclinations? Business Economics (Cleveland, Ohio), 47(1), 57–67. https://doi.org/10.1057/be.2011.37